Are Germany's Unions Paralyzed?

In June, Germany's mighty metals and engineering union IG Metall took to the picket lines. Workers at automobile supply plants across eastern Germany dropped their tools in an effort to win support for their demand for the 35-hour work week western Germans have enjoyed for years.

But in a time of economic stagnation, the strike backfired. There was little support among eastern workers and public sentiment turned sharply against IG Metall after the strikes began to affect production at car factories in western Germany – the source of what are arguably the country's most-important exports. In a move that could have dire consequences for the future of the labor movement here, IG Metall raised the white flag, surrendering its demands, sending its workers back to the job.

In the days since the strike ended, a nasty and very public power struggle has broken out between the union's outgoing leader, Klaus Zwickel, and his handpicked successor, Jürgen Peters, whom many at IG Metall have blamed for the strike debacle. Zwickel has called for Peters' resignation, but the man tapped to lead the union has dug in his heels and is refusing to go.

In an interview on Tuesday, Hagen Lesch, who leads the labor policy center at the Cologne Institute for Business Research, discussed IG Metall's current crisis and its ramifications for Germany's politically dominant unions.

IG Metall is experiencing its worst crisis since World War II. What does its defeat and current leadership crisis mean for its future?

Even before the failed strike and subsequent leadership struggle, IG Metall stood before a fundamental decision. The question is whether the union wants to be an active participant in questions not only of wage policies, but also in labor reforms (the government has proposed), or whether it wants to position itself as a type of fundamental political opposition. The need for this discussion has become even clearer through the events of the past two weeks.

Do you think IG Metall's crisis will have an impact on Germany's other influential unions?

IG Metall plays an extremely strong leadership role in Germany's labor movement, it's the trailblazer, as it were. But the labor movement in Germany is far from homogenous, and there are other unions that have far different wage negotiation policies than those of IG Metall. IG Chemical, for example, is a very consensus-oriented union. During the past 30 years, there have been no labor battles or strikes in the chemicals industry. They've created wage contracts that contain a high level of flexibility that doesn't exist in the metals and engineering industry. IG Chemical's example shows that some unions have advanced much further than IG Metall, whose negotiations seldom come without warning strikes or other noisy tactics. In that sense, I don't think IG Metall will be the trendsetter anymore.

In the past, IG Metall was successful in negotiating its demands. What went wrong this time?

The metalworkers union went on strike in a region where it hardly had a base. Less than 10 percent of the workers in the eastern metal and engineering industries supported the strike. Political sentiment is also crucial, and it was directed against the union from the start. Besides, in a period of economic stagnation, it's difficult to make a compelling negotiation for a three-hour reduction in the work week. IG Metall argued that the work could just be redistributed amongst more workers, without cutting down on production. But this would require additional workers and would have raised wage costs for companies by 9 percent – an increase that ultimately would have raised prices on products and consequently reduced demand.

In eastern Germany, (where unemployment runs as high as 19 percent in some areas), people are just happy to have jobs and they were afraid that the added wage costs would have reduced their competitiveness and put their jobs at risk. IG Metall obviously badly misjudged the situation.

During the past decade, membership in German unions has dropped. What do you think is causing this trend?

There are a number of influencing factors. In addition to a drop in the absolute number of members, we've also determined that the membership structure of unions has changed. We now have fewer active workers in union and, on the other side, we have an increasing number of pensioners who are still members but are no longer actively working. In other words, we're seeing the aging of our unions. During the 1990s, most job growth was in the services sector, with the number of jobs in industry stagnating. Meanwhile, unemployment has risen sharply, leading many to drop out of the unions.

In addition to this structural change, we're also seeing the individualization of society as well as the individualization of the working world. Standardized regulations don't apply as well as they once did – now there is greater demand for wage policies that are directed at specific businesses and sometimes even individual workers. IG Metall's inability to adapt to these demands has weakened the acceptance of a union – especially with young people, who are already underrepresented in the union.

Do you think Germany's unions are losing their political influence?

No, their political influence hasn't been weakened. Close to 25 percent of all workers are union members. It's become a minority of the population, but half the members of Germany's parliament are card-holding union members. Through this interlocking of unions and politics, the unions' influence is actually far greater than its (membership) would justify. Because of their power, the unions are also given seats on powerful committees, like the Federal Labor Office, which implements the country's labor policies. But the most important element is the power the unions secure through the interlocking of unions and members of parliament.

But there are signs that the influence is waning, as we saw earlier this year when the unions failed to block the government's plans to extend shopping hours on Saturdays.

Since then, you've also seen signs of that with Chancellor Gerhard Schröder's Agenda 2010 reform plans. The fact that Schröder is pushing through reforms that will loosen hiring and firing laws and ease other labor market regulations shows that the government has undergone a certain amount of emancipation from the unions. In fact that is really happening, but it's a very new development that hasn't really fully emerged. Some unions are doing an about-face and are once again engaging in dialogue with the government after learning that fundamental opposition has had little impact. But it's difficult to determine to what degree this will develop.

What conditions led to this "emancipation"?

The acute problems we're having with the labor market have led to this. For a long time, the government thought the job market could fix itself through positive economic developments. But in times of economic stagnation, reducing unemployment requires other measures, and the government has now realized this. Many of Germany's neighbors reformed their labor markets long ago, including Sweden, Denmark and the Netherlands, which have long had more flexible labor laws. Then, of course, there's Great Britain, a country whose labor market has hardly any regulations. These other countries have demonstrated that the employment dynamic increases considerably more when you have a flexible labor market. Now, the German government appears to have learned that lesson.

But many unions in Germany have expressed their opposition to Chancellor Schröder's labor market and social reforms.

All in all, unions like IG Metall and Ver.di are against any kind of encroachment on the living standards of their classic clientele. They don't want hiring and firing laws to be loosened, nor do they want restrictions that lead, de facto, to the inability to terminate older employees. And classical ideas still prevail inside many unions ... the currents of traditionalists and those who are more reform-oriented haven't flown together yet. And when you're in the middle of such a difficult and public discussion, it's obviously very difficult to provide constructive reform proposals. In this arena, the government has made more progress than the unions.

Many have suggested that IG Metall's failed strike marks a turning point in the history of unions in Germany. Now, they won't be taken as seriously as they have been in the past.

In the short-term I don't think the discussion over IG Metall is going to diminish the influence of unions in Germany. Independent of the leadership debate happening there and the lost strike, there was already a level of emancipation occurring between the government and unions. The government is pushing through reforms of the labor market as well as the public health funds and public retirement plan. The most decisive factor is going to be to what degree politics is able to cut itself off from the union in order to push needed reforms through. At the same time, there's the question of whether the unions will remain in fundamental opposition to the government's policies, as we have seen in Italy and France, or whether they will become constructive participants in the process.

If the unions take the latter road, they will remain influential.